Climate change regulation poses risk for business

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Leading international companies see greenhouse gas regulation as a potential risk, according to a study by the Carbon Disclosure Project.

The CDP’s Supply Chain Leadership Collaboration study found that 58 per cent of responding suppliers report their scope 1 and 2 emissions (supplier’s own fossil fuels burnt and electricity purchased). The majority of these suppliers are large or medium sized.

But only 12 per cent of suppliers report that they track scope 3 emissions (indirect emissions that are a consequence of the company’s activities, but which arise from sources that are owned or controlled by others). Many suppliers indicated difficulty in accessing scope 3 emissions data.

96 per cent of suppliers identified greenhouse gas regulation as a potential risk – taxation and emissions limits are the most commonly reported risks.

And suppliers foresee extreme weather conditions adversely affecting operations and slowing productivity.

58 per cent identified reduction in energy consumption as the best means of managing climate change-related risks, but only 26 per cent have established greenhouse gas reduction targets so far.

Paul Dickinson, CDP’s chief executive, pointed out that: “It is only by asking suppliers the right questions that large corporations will be able to manage their supply chain emissions.”

The Carbon Disclosure Project is an investor collaboration on climate change, with 385 institutional investors holding assets under management of $57 trillion.

Cadbury Schweppes, Dell, HP, Imperial Tobacco, L’Oréal, Nestlé, PepsiCo UK & Ireland, Procter & Gamble, Reckitt Benckiser, Tesco and Unilever all work through CDP’s Supply Chain Leadership Collaboration to measure carbon risks and liabilities in the supply chain.

Each of these companies has a supply chain spanning multiple sectors and countries. The majority of member companies’ greenhouse gas emissions are often caused by supply chain activities, such as processing, packaging and transport.

144 suppliers responded to the information request. Companies were mainly large and medium sized. More than a third of companies have a member of the Board of Directors responsible for climate change.

CDP is now working on a second Supply Chain Leadership Collaboration survey with information requests being sent out to over 1,000 suppliers. Suppliers include private companies and businesses based in China, where a significant number of suppliers to large multinationals are based. Findings will be announced in January 2009.

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